Covered Calls on Optionable ETFs

Casual investors often love the simplicity of index mutual funds and dollar cost averaging. Option investors love the excitement of a more exotic trade and the downside protection offered by common trades such as Covered Calls and in the money spreads. Exchange Traded Funds are a fund tracking an index, but can be traded like a stock.

Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_10_04_ETF.mp3

ETFs with derivatives take this to the next level. They allow traders to speculate on the future of a stock index. Below is a list of some of the optionable ETFs currently available to traders.

Exchanges Welcome EFTs to their Ranks:
Exchanges are encouraging ETFs into their equity ranks. In fact, they often recruit them. Stephen Bloom, Senior Vice President of the NASDAQ, says his exchange is committed to ETFs’ success and the success of the investors who want them.

ETFs now number over 500 and the equity in them has increased over 40% in the last year. Also, ETFs may represent a way for investors to quickly trade pseudo mutual funds with a lower overhead.

ETFs, however, trade on an exchange. Therefore each transaction may be subject to the broker’s fee. Mutual funds typically do not charge a brokerage fee. If an investor conducts frequent transactions for small amounts, brokerage fees may erode gains and make mutual funds a more attractive alternative. However, low or no-cost brokerage transactions or a more profitable option strategy may make them more viable for small investors.

Options and ETFs:
For those interested, ETFs are a way to diversify risk when conducting option trades. Below we have a list of covered calls on ETFs for the months of November and December.

PowerOptions search made this quickly possible; we simply cut and pasted the ticker symbols from the previous chart into a personalized recommended list. We then saved the list and used a simple generic covered call search to identify trades with greater than 3% potential profit and greater than 3% downside protection for the desired months.

Here are the results:

For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

[tags] covered call investment strategy, investment strategy, poweroptions [/tags]